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Palladium Prices Hit New Record, Rhodium Pushes To 5-Year High

(Kitco News) - Palladium and rhodium continue to be the two shining starts in the precious metals sector, both seeing surging momentum this week due to a growing imbalance in their supply and demand fundamentals.

Palladium is closing out the week at a new record high; December palladium futures last traded at $1157.90 an ounce, up 5.5% from the previous week. Meanwhile, rhodium is currently trading at its highest level since mid-2010, with its cash prices last trading $2,370 an ounce.

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Because of tight market conditions, analysts say that both of these metals have room to move higher. Although analysts warn that rhodium prices are extremely volatile as the metal only trades in opaque over-the-counter markets.

Although considered precious metals, both palladium and rhodium have significant industrial uses with most of the demand coming from the auto sector. Both metals are critical components in catalytic converters, which reduce harmful emissions in gasoline engines.

Peter Hug, global trading director for Kitco Metals said that optimism that the U.S. and China could reach a trade deal in the near future is adding to the momentum in an already bullish environment.

“The supply fundamentals continue to favor both metals, especially if Chinese growth begins to pick-up,” he said. “We have been structurally bullish both the palladium and rhodium markets for the past 18 months.”

Ryan McKay, commodity strategist at TD Securities said that they don’t see demand for palladium fading anytime soon as the market also faces growing supply deficits.

Commodity analysts at MKS PAMP said that they also like the fundamental outlook for palladium.

“Palladium is still in deep backwardation as it has been for many months now with physical premiums still very high,” they said in recent report.

Despite the strong optimism in the marketplace, some analysts are warning investors to not get too excited with the latest price action as there are growing concerns surrounding the health of the global economy.

Mckay said that although there is a risk that palladium prices fall in the near-term as sentiment on the global economy sours, he sees any selloff as a short-term move.

“Even if the global economy weakens, the palladium market will remain tight, supporting prices,” he said. “We would need to see a major slowdown in global growth to impact prices.”

Hug also downplayed concerns over the global economy. “There is a danger of slowing global growth in 2019, which may impact car demand and bring the current palladium/rhodium deficits into a more balanced state, but in the short-term pressure remains tilted towards higher prices,” he said.

Hug also warned that both markets are extremely unpredictable.

“Investors should note that both markets are extremely thin and volatile price swings will remain the norm for the foreseeable future,” he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.